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Rupesh Roshan Singh, Lovely Professional University Unit 12: Receivables Management

Unit 12: Receivables Management Notes

CONTENTS
Objectives

Introduction
12.1 Costs and Benefits of Receivables

12.1.1 Costs

12.1.2 Benefits
12.1.3 Cost/Benefit Analysis

12.2 Three Crucial Decision Areas in Receivables Management

12.2.1 Credit Policies
12.2.2 Credit Terms

12.2.3 Collection Policies

12.3 Factoring and Credit Control
12.4 Managing International Credit

12.5 Summary

12.6 Keywords
12.7 Review Questions

12.8 Further Readings

Objectives

After studying this unit, you will be able to:
 Identify the cost benefit analysis of receivables.
 Describe the crucial decision areas in receivable management
 Explain the Factoring and credit control
 Discuss the management of international credit

Introduction

The term ‘receivable’ is defined as “debt owed to the firm by customers arising sale of goods or
services in the ordinary course of business”. When a firm makes an ordinary sale of goods or
renders services and does not receive payment it means that the firm has granted trade credit
and the amount appears as receivables in the books of the seller, which will be collected in
future. Thus, accounts receivable represent an extension of credit to customers, allowing them a
reasonable period of time to pay for the goods or services which they have received.

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